The 2020s have been rife with business, political, and economic disruptions that completely reshaped daily life and the economy. The investing landscape of 2025 promises unique opportunities for startup investing, driven by new disruptors entering the market to meet strong demands for both physical and digital goods and services.
Startups in certain industries form a mutually beneficial relationship with investors seeking high-growth investments that qualify for Qualified Small Business Stock (QSBS) treatment under §1202 of the Internal Revenue Code. This preferential tax treatment—which can make up to 100% of the capital gain income from the QSBS sale tax-free—provides compelling incentives for investors to fuel growth in sectors like technology and manufacturing.
By supporting fresh startups, investors embrace both opportunity and risk, while this powerful tax-saving tool encourages domestic economic growth with significant financial rewards to sweeten the deal.
If you’re considering adding QSBS to your portfolio, here are the top three industries to watch in 2025 and beyond.
Investing Opportunities for 2025 and Beyond: 3 Industries Facing Surging Demand
Automotives
In 2025, global sales of new cars will rise by 2% and new truck sales by 4%, thanks to infrastructure expansions, according to The Economist. The US automotive sector, valued at over $1.5 trillion in 2024, has fully recovered from the pandemic slump when reduced travel impacted demand. Disruptions in supply chains also pushed up used car prices significantly, persuading many buyers to purchase a new vehicle instead.
As consumer demand surges for electric vehicle options and cutting-edge automotive technologies, US car manufacturing is expected to see consistent growth in 2025 and beyond. While many established automotive companies surpass the QSBS gross assets threshold, automotive technology companies may still qualify.
Sustainability Solutions
Startups focusing on sustainability in supply chains, business operations, and everyday life are poised to see substantial growth in 2025 and the remainder of the decade.
McKinsey found that 78% of Americans consider sustainability important, although concerns about businesses “greenwashing” wasteful products and processes remain prevalent. That said, sustainability offers savings for both consumers and businesses: electric vehicles cut fuel costs and come with tax benefits, while reused materials are cheaper than raw ones.
Innovative startups—such as platforms partnering with businesses to recycle waste into reusable materials—are capitalizing on this trend, turning one company’s trash into another’s profit through apps, software subscriptions, and other creative solutions.
Telehealth
The telehealth sector experienced explosive growth during the pandemic, and this growth is far from over. The Department of Health and Human Services notes that although patients tapered off their reliance on telehealth by 2022, telehealth usage remains above pre-pandemic levels. Telehealth expands access to care for underserved populations, including disabled individuals, the elderly, rural communities, and those unable to take time off work for simple healthcare needs like asking their provider questions or refilling a prescription.
With a growing aging population and the long-term health effects of COVID, telehealth startups remain a viable opportunity for investors. While healthcare companies are ineligible for QSBS treatment due to Section 1202’s exclusion of the “health” field, this typically applies to patient care. Consumer healthcare technologies, such as apps facilitating virtual doctor visits, may still qualify. However, eligibility must be confirmed by an expert to ensure compliance.
How Do Industries Qualify for QSBS Treatment?
Tax law specifically names industries that are ineligible for QSBS treatment, such as health (direct patient care), finance, and professional services. This means industries such as technology, manufacturing, wholesale, and retail often qualify.
This tax incentive is designed to spur domestic economic growth and boost consumer spending. While tourism and financial services generate significant revenue, the focus of this law is on providing services that do not rely on the reputation or skill of its employees, or “producing a product,” whether digital or physical. Tangible goods like cars and digital products like apps fit the bill.
To learn more about QSBS investment opportunities and how to navigate their tax complexities, contact our experts today.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
